tv Senate Judiciary Subcommittee Hearing on Corporate Competition Law CSPAN December 27, 2018 8:07am-9:59am EST
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c-span is brought to you by your cable or satellite provider. >> necks, hearing to examine antitrust and corporate competition laws and the differences between how they are enforced by u.s. and the eu. this hearing of the senate judiciary subcommittee on antitrust competition policy and consumer rights is one hour 45 minutes. >> welcome to this hearing of the subcommittee on antitrust competition and consumer rights. today we are pleased to her from five distinguish witnesses who will be testifying about competition law approaches to monopoly and abuse of dominance
in the u.s. and of the european union. we welcome each of you and we thank you for your time. we are grateful you are willing to come and spend some time with us today to educate us on these matters. an assumption has been prevalent in certain circles, including some of our colleagues on capitol hill that america has a monopoly problem, armed with this assumption politicians that antitrust enforcers confront these monopolies. often these proponents of more interventionist antitrust enforcement site the european union a a small front u.s. enforcers should proceed. the question of whether america has extensive monopoly problem is a topic for another hearing and not one for today. today we're going to focus on how european competition law compares to u.s. antitrust law what the europeans call abuse of dominance. the european commission, the eu's administrative body, has
certainly been active in prosecuting company for allegedly abusing their dominance of european markets,, especially in the area of high-tech. the eu has leveled fines of billions of dollars on firms like google, microsoft and intel. in september the european commission announced that it would now investigate amazon. regardless of whether the u.s. might need stricter antitrust enforcement, i believe an understanding of the history of the institutions and the goals that shape eu competition law enforcement and how those factors differ from the u.s. experience might well be critical to judging whether american antitrust enforcers should follow europe's lead. in particular i look for to hearing about the impact that eu competition law enforcement has on u.s. businesses and what that means for american consumers.
as i've said before, a a competitive marketplace of course strong antitrust enforcement, a strong systems antitrust laws with consistent, conscientious enforcement of those laws. however, that enforcement has got to be sensible and needs to be grounded in object of economic analysis. antitrust should show the interest of consumers rather than being a tool of competitors to punish the rivals who happen to be successful. moreover, interventionist antitrust enforcement that is poorly conceived could have long-term, serious effects on the economy and on american consumers. in particular we don't want to pursue antitrust policies that might undermine the innovation that has long served as the engine of the american economy and fostered the development of the greatest economy the world has ever known. nor can we afford to return to antitrust policy aced on the
subjective political and social goals of unelected bureaucrats influence pressed by utopian ideas or special interest groups. we look forward to discussing each of these issues with you today. senator klobuchar, the ranking democrat on the subcommittee will now deliver her opening statement. >> thank you very much, senator lee, thank you for holding this hearing. i think it will be useful for us to learn about what is going on with the european rules and regulations but i do want to make clear that you and i both shared interest, a very strong zeal for looking at our antitrust laws what i don't see this as should we follow europe's lead. i think we need to take our own lead. it doesn't have to look exactly like what they're doing in your. it may be different but right now we are at a moment of paralysis when it comes to really moving forward on one antitrust enforcement, and i do
preach some of the efforts of the justice department and the sec but they become so conservative that it has become on the supreme court level with two new justices that have even more restrictive use of antitrust laws, i think it is becoming harder for us to go that route when you look at the fact we've seen a 50% increase in merger filings in just the last five years. when i look at what we're doing in america when it comes to legislating on this issue, we are really not doing anything at all. i think we need to do something to better equip the agencies to be as sophisticated as the people they are regulating and the trillion dollar companies that are coming into their doors and that i also think we need to look at changing some of the standards for the changing environment where in. secondly, when you look at the "new york times" story today, what is happening with facebook, we also to look beyond antitrust to privacy regulations and put
something in place there. which we haven't done it would literally been paralyzed and also we need to do something more when it comes to political ads and things that are on social networks. i appreciate it very much this hearing so we can find out what europe is doing what it don't think the frame and the question really is should we follow their lead, the question should be i would take any lead at all? i don't think we are. i think we have ideas in build our country is not done anything to protect ourselves in competition and innovation for what is coming at us. why? well, first of all there is global attention on the effect of powerful firms on competition and that is a good thing that we are talking about this and that the chairman has called this hearing. european enforcers are issuing record fines to some of the world's largest companies for abusing their dominant market
position. in our country according to the pew research center, two-thirds of americans have come to believe that the economy quote unfairly favors powerful interest end quote leading to calls for more vigorous antitrust enforcement. another factor, second, we are experiencing technological change that is both reshaping the global economy and concentrating power in the hands of relatively few companies. as a result both the european commission and the u.s. antitrust authorities are faced with the challenge of protecting competitive markets while preserving incentives to innovate. at our last hearing i mention my favorite game going up was monopoly. i made the point that now 90% f freight traffic in our country is handled by only four class when railroads which happens to be the number of railroads on the monopoly board. i don't think that's coincidence
anymore because we're seeing that consolidation of those new media consolidation like we've never seen. with these benefits that we've seen some of the breakthrough technology, comes the exportation of monopoly power and the ability to charge inflated or discriminatory prices which we've seen some with a railroads and when you look at the past, our country intervened. sometimes it took decades to get the sherman act passed or to start enforcing it while it was on the books and lay dormant but we did something. right now i feel we're entering this moment in time without even considering doing anything about changing our laws to meet the challenges. third, enforcement directed monopolization, what europeans call abuse of dominance, is the area in which we are seeing the biggest differences between the u.s. and europe. critics of european capitation while have often said that the
u.s. protects competition while the eu props up inefficient competitors. this is a critique that one could make, but as assistant attorney general recently noted, both u.s. and eu enforcement is economic space and directed at protecting competition and consumers applying a consumer welfare standard. so we do have things in common even though our approaches may be different. in the area of single firm conduct, there are real differences. the european commission and member states authorities have been issuing significant fight and initiating investigations against some of the world's largest companies, including google and amazon. the u.s. agencies have been far less active in this area. a number of reasons have been raised to explain the difference in enforcement activity. some have pointed to differences in the substantive law, institutional differences making
enforcement easier in europe or differing attitudes towards monopoly power. others blame supposed european bias against successive american firms or reluctance in the united states to challenge our own companies. we need to get to the bottom of what the factors are, and i am looking for to learning more about what europe is doing but honestly, , the last time i checked we tended to try to take the lead on these issues in this country. our country is based on innovation, based on competition. you go back to have smith and the founding of economics in this country and what we were focused on, and that was making sure we didn't have dominance by one from or have the takeover of certain area. what i fear is there's a connection between what we already in the the "new york t" when we got up this morning and the fact were not doing anything and being afraid and in at a can't do anything, not just with antitrust but also privacy law and everything from campaign
finance on. supreme court cases like brooke group region and most recently ohio versus american express have made enforcing antitrust laws which is also part of this whole thing, more challenging and recent changes to the makeup of the court as a noted will accelerate this trend. it's up to us to take action to ensure tomorrow's antitrust laws can effectively protect competition. i think we can learn lessons from what europe has done. i don't think that means we need to as a chairman said follow their lead. i think we have to break it under oath and start leading. something that we are not doing. i want to thank you very much and just note that one of the things i'm going to bring out as we question is innovation. because i think sometimes it's viewed as antitrust law enforcement is viewed as somehow limiting innovation. it is of course just the opposite. the whole reason with antitrust
laws is that we want to promote small business and competition and innovation, , and we can't o that if one company is buying up everyone, if one company is dominating either horizontally or vertically and makes it impossible for new players to get into the market. and at the same time as this what i consider hideous the fact that congress is not stepping in and trying to protect consumers in this country, whether it's from prices for from protecting their own privacy invasions like we write about today. thank you, mr. chairman. >> thank you very much, senator klobuchar. we'll turn to her witnesses and i will introduce each of them briefly. william copacetic is the global competition professor of law and policy and the director of the competition law center at the george washington university law school. he's a visiting professor at the dixon school of law at king's college in london.
since august 2013 he has served as a nonexecutive director on the board of the united kingdom's competition and markets authority. from january 2006-october 2011 the professor was a member of the federal trade commission which he chaired for march 2008 until march 2009. he also previously served as the fec general counsel. geoffrey manne is is the foundr and president of the international center for law and economics. nonprofit nonpartisan research center based in portland, oregon, is also distinguished fellow at northwestern law school center on long relation and economic growth. prior to founding icl he, mr. manne was a law professor at lewis and clark law school. early in his career mr. manne practice antitrust law. -- eleanor fox is all professor of trade regulation at new york
university school of law purchasers as a member of president clinton's international competition policy advisory committee and is a commission on president carter's national commission for the review of antitrust laws. professor fox has advised numerous jurisdictions on antitrust including south africa, kenya, russia, poland and hungary. before joining the faculty of nyu law, she was a part of the new york law firm. tad lipsky stripling and adjunct professor at george mason antonin scalia law school where he also served as the director of the advocacy program of the global antitrust institute. he served as acting director of the ftc's bureau of competition between february and june 2017. for. >> translator: c mr. lipsky was a partner for 15 years picky pretty chief antitrust lawyer for the coca-cola company and of the antitrust division for the reagan administration. jonathan kanter is partner and
cochair of the antitrust group at paul, weiss, rifkind, wharton & garrison were focused on antitrust mergers and acquisition litigation and counseling. equally represent some of the world's most notable media and technology compass occluding news publishers, digital media agencies, providers of online services in streaming data providers. he pay the support of the u.s. federal trade commission bureau of competition. so before we begin i would like to swear in each of our witnesses. if your state and raise your right hand. [witnesses were sworn in] and professor kovacic, we will t with you. you may begin. >> chairman lee, ranking member klobuchar, senator blumenthal, i'm grateful for the opportunity to participate in these proceedings. i applaud the custom of the
subcommittee which goes back at least a half century doing comparative studies especially with a focus on european union and the the u.s. systems. from 1975-76 76 i was a research assistant on majority staff of the subcommittee of the chairmanship of senator fell apart and i saw firsthand the benefits of the committees conducting these kinds of deliberations. why compare the experience of the two jurisdictions? first, they are the two most influential jurisdictions in setting global standards for the treatment of anticompetitive behavior. the u.s. relationship with the european union is uniquely significant, the most important bilateral relationship that the united states has in this field, and the european union has become the leading jurisdiction on the world influencing the setting of global also standards, all reasons to perform this comparison. i want to focus on three features of the system to provide a framework for our conversation today about at the
systems relate to each other. i'd like to talk about goals, a little bit about the legal framework and current enforcement policy and i'd like to talk about process and in and this i'm giving you my views, not those of the competition and markets authority in uk where do serve as amount -- nonexecutive director. first, the question of goals. senator klobuchar said, i think both institutions on both sides of the atlantic have expressed consistently a commitment to what might probably be called a consumer welfare approach. there are also subsidiary names in the european union involving market integration as a central goal of the operation of the treaty and the community as a whole, may be less important in the air of abusive commons in the treatment of agreements. there's a basic question about what consumer welfare means and you had your own deliberations on this topic. the ftc has elaborate humans on this, what does this mean, i think there's a common view in
the two jurisdictions but what it does not mean. it does not include the protection of competitors. enforcement officials on both sides of the atlantic would join arms and so we're not in the business of protecting firms simply to protect their own position in the market. second, there is an intense debate going on in agency on both sides of the atlantic about what this concept should mean going ahead. should it embrace a wider array of values? should emphasize more than just price the facts, or expansively at innovation? i would say that debate is taking the place today and will continue. i don't see a great difference in the emphasis that the two institutions on both sides of the atlantic place on the overall objections. i do want to discard what interpretation. it is often said a top political leaders in both jurisdictions that each set of institutions is committed to bend to political pressure and protectionist impulses as a key source and
motivation of enforcement. i rejected that. i don't think that motivates the ftc, the department of justice or the european commission. matters involving google provide good illustration, the ftc, why did a with the case? i think about the obstacles of bringing a successful case before voting and he came to its own conclusion based on an examination of evidence that the competitive effects of the child's behavior were not severe and the european union, why do proceed? i think that conference they could bring successful case in the court and bringing the case would improve economic performance. there was a discrete perhaps about the analysis of the underlying facts and the effect of the behavior. it was not in either instance unconfident caving in to political pressure or getting into a sense of protectionist impulses. i'd like to put that interpretation of goals and aims the side. i don't think that motivates
what these competition professionals do. what about doctrine? there is a shared commitment to the application of sound economic principles. indeed, in recent cases like intel can we see a move away from presumption that give decisive effect to specific behavior and an inference that at first competitive effect always follow from that. i would say as our colleagues have mentioned today, as members of the panel have said, the eu says it is more intervention minded. they had brought more cases, a higher temple of activity. why? it's partly rooted in article 102 of the treaty on the function of the european union which provides an express mandate to do more things on your system does. to attack on their purchases of selling prices to challenge excessive pricing, is a provision that do not have a counterpart in the u.s. law and it explains why there is a greater capacity in freedom
based on interpretation of the courts in europe to child predatory pricing. there's no recruitment recorded. kim prose the broader duty of the deal and duty to deal on non-discriminatory terms. in short, yes, indeed european framework is more intervention minded and a legal framework provides that foundation. in the u.s. there is broad freedom from dominant firms to choose pricing, product development and marketing strategies of their own choosing. this this is an unlimited. indeed the ftc is running to macquarie important case is now one is called qualcomm that involves the boundaries of use framework. what explains the differences? that the well-known influence of economic and legal perspectives of the chicago school but it emphasize two of the things that happen in your spirit one, a broadly shared concern that deals with centrists and across the board in the supreme court with the impact of private rights of action. the sense over deter in the u.s. system. this issued by harvard as well
chicago and has been accepted by the supreme court in cases which had a broad consensus when it comes to this issue of over deterrence. the ftc section five provides a broader framework for enforcement that basically that has had a very limited effect has been given a a very limited interpretation by the court. in short, if this concern were not so prevalent i am convinced u.s. framework would be more expansive and with much more resemble the eu approach to enforcement. i finish by saying that the eu quality-control mechanism tend to be more frontloaded. and some was there more robust than your system, the obligation will explain outcomes, greater rights for third parties to complete and challenge enforcement decisions. i think that the differences in terms of quality control tend to be exaggerated but i do welcome your questions and comments on all of these issues as we go
ahead. thanks again for the chance to be here. >> thank you, professor kovacic. mr. manne. [inaudible] >> sorry. thank you, chairman lee and ranking member klobuchar. thank you for giving the opportunity to testify today. the urge to treat antitrust as a legal swiss army knife capable of correcting all manner of economic and social ills is difficult to resist. conflating size with market power and market power with political power, recent calls for regulation of large businesses are often framed in antitrust terms even though they are rarely rooted in legal claims or sound economic analysis. this attraction to powerful tool is precisely why we should care about the scope, process and economics of antitrust and its politicization. for the last 50 years or so u.s. laws developed the position relative restraint in the face of novel and because conduct while the eu tends to read
uncertainty as the outward expression of a lurking threat. in spite of or perhaps because of this, many estimate the u.s. should emulate the eu and its approach. today is like to call your attention to four seems that defined the keepers with the regimes diversion and with eu approach is less likely to serve consumer interest at first the eu tends to address antitrust issues within a precautionary principle framework one u.s. takes an error cost approach. differentiating procompetitive from anticompetitive conduct has always been the center difficulty of antitrust when the very same content can you the benefit or harm consumers depend on complex and often unknowable circumstances, the cost of over enforcement is at least as substantial as the cost of under enforcement. the u.s. supreme court has recognized false-positive errors might be greater than those attributed to false negatives because economic system corrects monopoly more readily than it corrects judicial errors.
the eu's per contra principle approach is the antithesis of distributed and oblique markets are likely to function well in general and certainly not sufficiently to self correct in the face of monopolization. no one believes that markets are perfect or that antitrust enforcement is never appropriate. the question is the marginal comparative one. given the limits of our knowledge and errors that can lead to come over that off with a more discretion a regime or one of which enforcement is limited to causes of action or fairly certain will serve consumer interest? this is this is a question of ct the margin but it is far from marginal in its significance. second, the eu antitrust rest heavily on presumptions of harm or youth courts require demonstration actual anticompetitive effects that he was approach is more consistent with the learning of modern economics which nearly universally counsel against presuming competitive harm on the basis industry structure and in favor of presuming benefit from vertical conduct. the eu approach disregards these findings and presumes the
contrary. it's not clear at the high court admonition will affect the commission at all. third, the eu penalize the existence of monopolies where the use prohibits only the extension of monopoly power. the . the u.s. monopolization law prohibits predatory exclusionary conduct that results in harm to consumers pick the eu by contrast regularly punishes the mere possession of monopoly power even more lawfully obtained. the eu even go so far as to target companies that may lack monopoly power but merely possess an innovative and successful business model. for example, actions involving companies ranging from soda manufactured to ditch about from, for suddenly stop access to company private property for less successful rivals. fourth and crucially competition policy in the eu is purposefully
subject to politicization while politically non-economic aims are not a part of your slaughtered the european commission is a policymaking body charged with enacting the commission president agenda. the goal of european competition forces are both diverse and often untethered from economic thinking. under article 102, firms can be liable for practices that are unfair, prejudice consumers, place trading partners at a disadvantage or impose obligations that the been on the peter of other non-contracting parties. not only are these broad categories sometimes mutually exclusive but many of the concepts are almost impossible to translate into economic behavior. the result is eu regulators can pursue cases the best fit within a political agenda rather than focus on the limited practices that are most injurious to consumers. endorsing a european-style about the antitrust and what to do justify high profile cases against large internet platforms would prioritize political expediency over the rule of law and consumer well-being. the risk of a more eu like approach is that it will end up
thwarting ecological evolution and enshrining mediocrity in the digital economy where innovative practices with positive welfare effects can be demagogue especially by inefficient firms looking for a regulatory leica. i urge this committee to consider not just whether the eu approach seems to permit the government to reach a preconceived outcome, for example, placing large tech but under antitrust review but whether it is factually desirable to try to imitate the eu's approach. >> thank you very much. professor lipsky. >> thank thank you, and i like o professor kovacic and thank you. i also am familiar with and very much appreciate this long run and very beneficial function that the subcommittee has played in airing a lot of complicated policy issues that arise in antitrust over the years and the very honored to be included in this process.
now, in the holiday spirit i'm going to try to be even shorter in my stomach that i intended to be because i think that professor mann has a fantastic job in highlighting some of the differences in doctrine and in substance. i want to focus on something that is only recently becoming a little bit more of an issue in the discussion about the differences in international antitrust regimes and specifically between the u.s. and the european union. it needs to be appreciated that the more interventionist and somewhat more uncertain approach of the european commission is enhanced by what i would regard as a number of weaknesses in the eu institutional setup, referring both to the commission into the eu courts. let me just highlight what you think are the four main weaknesses. first first, competition decisions in the european union are the primarily the responsibility of the college of
commissioners. these are 28 individuals with limited antitrust expertise, none of the commissioners participates in investigating or assessing evidence in the abuse of dominance cases. although firms in the second is, although firms accuse of dominance are entitled to respond, entitled to know what the allegations are, they are never entitled to presentation of evidence and arguments before the actual decision-makers. they are never entitled to present a full evidentiary and economic arguments before the actual decision-makers. in the eu, the european commission hearings are held before an agency official who lacks any substantive decision-making authority and u.s. only limited procedural control over the conduct of proceedings. third, the entire enforcement process leading up to the commission decision is conducted within a single director
general, dg comp with a limited external supervision from other commission services and no meaningful separation between those individuals who investigate cases, before might the objection and then evaluate the objections in light of the evidence as the matter proceeds up through to commission decision. and finally, although commission decisions, competition decisions are subject to judicial review, the eu about process is extremely prolonged and gently provides a very broad margin of discretion to the commission. and i think these institutional characteristics and procedures tend to reinforce the other doctrinal circumstance, the substantive views the professor manne addressed that give rise to a much more interventionist and him and in many respects more uncertain prohibitions on dominant from conduct relevant to the u.s. now of course the chilling effect that is been mentioned as extremely important here because
both u.s. monopolization rules and the eu abuse of dominance standards are enforced with very heavy remedies. an american firm that is subject to a monopolization case can be simply broken up the way that the bell system was broken up or the way united shoe machinery corporation was broken up. many of these companies suffer hundreds of millions or even billions of dollars in damages as a result of private treble damages suits under our statutes. and, of course, the eu as you mention in your opening remarks, mr. chairman, imposes multibillion dollars fines and has not hesitated to do so on a variety of companies. some huge consequences of antitrust enforcement campello firms to follow the law to the extent they can proceed perceis limits. antitrust enforcement should pursue only those approaches that clearly justified the imposition of this type of burden on private sector firms,
last innovation and great to the to be subject to this chilling effect that could have significant adverse economic consequences for us. for these reasons i think the use antitrust standards and procedures are better targeted and better tailored to the objective of maximizing innovation and economic growth and productivity than in the case of the eu. so i will conclude my summary there. thank you. >> thank you. esther fox. >> -- professor fox. thank you, chairman lee, ranking member klobuchar, and members. i do appreciate your having these hearings. i am very happy to present my views on the differences between eu and u.s. abuse of dominance and monopolization. what i would like to do is to set the word about the evolution of each system because i think each system is grounded in its
own roots. and then to talk a little bit about presumptions that i think i'm really caused the systems to the verge. third, to mention implications for big tech and big data. i also want lastly to say a word about is it true as some have contended that the european union is simply suing the u.s. big tech firms because they are so successful, and i want to say a resounding no. so to start at the beginning, the two systems did grow from different routes. the united states system beginning in 1890 grew from an idea that there was huge, raw power among the trusts and wanted to condemn the power.
not with any consumer welfare standard but simply against power so that all people could compete on their merits. the system changed quite dramatically over the reagan administration in the 1980s in which the u.s. system became very concerned with efficiency, and in my view, has led into a great conservativism, spatially a few supreme court, especially in matters of monopolization where the court gives great deference to the dominant firm and wants to unleash the conduct of the dominant firm except in a very, very small margin. the european union has different routes. it has roots in wanting and needing peace in europe, and doing that by economics and by establishing a community of free movement. the threats and establishing or challenges and establishing the free movement were twofold. one would be that firms would
try to put the berries up that were torn down. the other is that the states, member states would establish anticompetitive barriers and the european union is very progressive in pursuing both elements. this condemn certain state anticompetitive action that is the member states, and , and it pursues private anticompetitive action. in comparing the two systems, there is a convergence, the biggest difference can be seen at the treatment of the refusal to deal in which the u.s. law under the supreme court has great latitude, enormous latitude for a firm to refuse to deal, where as the european union when they see certain power being exercised in ways of
laser anticompetitive, feels much freer to intervene and it feels freer to intervene on behalf of consumers and innovation. in other words, as professor kovacic said before, the two systems are really trying to do the same thing. they want to serve consumers. they want to serve innovation. the eu is much more emphatic in saying we want to serve all players in the market but not protecting inefficient firms. implications for big tech, big data, i think the european union system is simply better positioned to see power and to attack power and uses of power. they cannot attack size, but they do challenge behaviors that tends to raise barriers and keeps smaller firms out. and they have more flexibility under their 102 that we had under section two of the sherman act. federal trade commission in maggie has this flexibility.
we seek meaning new behaviors today, especially by the big tech firms, trying to put up moats around their own system. they have done a lot of good but they're trying to keep emerging competitors out by suppressing those who use the platform, taking data from those who use the platform and using it for the own purpose. tablet at the new threats that they see in the way of competition, and inserting various clauses so that interoperability is difficult, and i think that we can learn lessons from looking at the european union in the way in which it examines the anticompetitive behavior in big tech areas. the u.s. is far behind the eu. germany, european union itself, also now australia have come up with proposals even for further study of how the big data firms are suppressing, oppressing, and
exploiting. and i agree with ranking member klobuchar that it's time for the united states to be taking a more active position. thank you. >> mr. kanter. >> chairman lee, ranking member klobuchar and members of the subcommittee, thank you for inviting me to speak with you today. i am honored to participate in today's discussion and humbled to appear alongside my fellow panelists. i deliver my remarks through the lens of an antitrust lawyer with approximate 20 years of experience. that experience includes appearing before state antitrust authorities, federal antitrust authorities and european antitrust authorities. i've been a pleasure working in private practice as those the u.s. federal trade commission. i should note by remarks today are my own if they don't this is reflected the views of my law firm or its clients, but as the humble petition on the panel, i guess you can consider these chronicles from the front lines.
i would like to share a few observations. first, you were examining the u.s.-eu competition policy, it simple to understand the origins of our own antitrust laws. antitrust is inherently u.s. concept deeply rooted in the founding of her country. the framers of our constitution were primarily concerned that concentration and abuse of power which included concentration of political power which resulted in a government with checks and balances, decentralization but there were also concerned about economic powers and political liberty. by the close of the 19th century it became clear including congress the consequent economic power can't impose greater threat to liberty as political power. response the age of the robber barons and industry trust, congress passed the sherman act which has been hailed by the supreme court as the magna carta of free enterprise. in 1914 congress passed the clayton act by merely to address mergers and acquisitions among
other things and they created the ftc and the ftc act. after world war ii interestingly, the u.s. sought to export antitrust law as a means to promote free and open democratic societies. the u.s. insisted on the development of show antitrust law following world war ii. that german antitrust law is the foundation of european antitrust law we are discussing today. as at the urging of the united states following world war ii based on concerns the consequent economic power led to the fascism the result in the rise of the nazis. following frankly the united states also worked in the antitrust law in japan following world war ii as well. after world war ii we even strengthen our own u.s. antitrust law by closing some loopholes were there to asset acquisitions. it's worth noting as we stated today he's antitrust laws, the original text remains largely if not completely unchanged. i will observe that we have many
antitrust laws on the books, not one of them uses the phrase consumer welfare. indeed a plain reading of the antitrust laws, the text of the antitrust laws demonstrate that the object of it antitrust to protect competition in the competitive process. it is therefore that my view we should not be too quick to judge of the countries enforced their own competition laws and instead as senator klobuchar mention we should remain focused on it best to apply our own. in comparing the eu and the u.s. there's a wide oath between the two jurisdiction of the this is misplaced and that there are overwhelming similarities in the two machines the larger outweigh any differences. for loss and the books really are substantially similar. if you look at the text they both address agreements in restraint of trade, anonymization and mergers. if our laws are so similar, why
are the sometimes diverged in the treatment of specific cases? to me that divergence reflects a difference in recent views about policy and prioritization, many politically oriented question. not partisan political. specifically your has become more proactive in addressing and pressing questions about technology markets. this should not be surprising. the global economy is experiencing transformation of the stork proportion for business models that were once unimaginable one or two decades ago are now commonplace. and there's a major transition that is occurring in our economy. europe has pursued a process which includes bringing u.s. enforcement cases or they can develop a lot reflect changing market conditions. it is important at least to meet the united states should not adopt a policy of reactionary contrite and is him. instead of policymakers should vigorously explore as a due at
the ftc new questions to ensure our own laws, law-enforcement machines remain relevant to today's economy. otherwise we have greater risk that the will be a tendency to want to engage in regulation, and although regulation may be appropriate in some instances, it's my firmly held view that antitrust law enforcement is a better way to protect and promote the free market economy. to quote the great ftc chairman robert petoskey, antitrust is of deregulatory philosophy. but if you're going to let the free market work, you better protect the free market. thank you very much. >> thank you very much for opening statements have been very, very helpful, and we are going to go now into rounds of questions and i will begin. professor kovacic, i will start with you. in your written testimony, you're just like today you dispute the author may claim that the eu protects competitors but the eu's view that dominant
firms have special response team with regard to weak competitors. suggest europeans believe rivalries should be protected even when doing so would reduce economic performance. doesn't this in effect mean that the antitrust enforcers are enforcing competitors, protecting competitors rather, whether intentionally or not rather than just protecting an open competitive process competition for the sake of their own? >> thank you, mr. chairman. i would offer another interpretation of that process. i do think there are different perceptions and the united states and europe about the resilience of markets. and there is perhaps a greater face in u.s. although that face is being tested by our robust debate today, that the capacity for firms to enter markets and to challenge positions of
significance is greater than that perception is in europe. i think there's a sense in europe that once firms disappear, that does not could be someone showing up in a relatively short time to take on the incumbents. so i do think there is a different in perception in europe and in the united states about the resilience of markets, and if you think the resilience is greater, you are more likely to let firms play without intervention. if you think that that resilience is limited, you are more concerned that the disappearance of an individual competitors going to distort the political process. and without trying to psychoanalyze either jurisdiction which would not be appropriate, i do think there is a different view about how robust those markets are in the u.s. approach has been guided in many ways by the sense that those markets are more robust with respect to capital formation, capital markets, entry. so i would attribute the
different perspectives in many respects to that difference in jews about market resilience. >> thank you. mr. manne, do you agree or disagree with that? in other words, is it an unfair characterization to say that a natural byproduct of eu competition law enforcement is that it protects competitors rather than competition? >> thank you, mr. chairman. i think the way you just put it is really appropriate, byproduct. i think it's accurate to say that it's not the primary doctrinal motivation of the commission, although i will note that as eleanor pointed out, the commission does pursue goals like, revolving around the market integration which at times can, in fact, mean that it needs to think about particular competitors in the service of
integrating the european market. but even leaving that aside i think the problem is really not so much that they put specifically pursue that goal as there is no constraint on their ability to do so if they choose to do so. so bill suggested that part of this comes down to our perception of how well markets function, but we are both aiming at consumer welfare and efficiency. and the difficult is the way ice things -- see things going on in european union is they don't really do, they are not obligated to demonstrate that anticompetitive harm will result absolute the conduct and that the loss of a particular competitors is harmful. so you see in the recent google shopping case for example, a massive opinion, 270 some odd pages, the entire analysis of which goes to the fact of the underlying conduct that there are complaining of, and none of which goes to diversity at the potential loss of the
competitors at issue actually harmed consumers. i don't know whether that is intentional or not. what i can say with certainty is it is absolutely permissible in the eu regime, that it will persist, there is no great chance the court will reverse that decision. i don't think it would persist and used it i don't think you can bring that case without a clear demonstration of anticompetitive harm and the result is that like in that case you can end up protecting competitors claiming it's for the benefit of consumer of without having to demonstrate that. >> so in other words, the analysis, the analytical rigors are not there to make sure that consumer harm is occurring as result of that. >> i believe that's right. and in particular i think at least at some level it comes from the weakness of judicial review. as senator klobuchar pointed to what she sees as the problems of the judicial review we're getting from the supreme court here, and we can talk about that as well, but let's at least
recognize that you can readily go much too far the other way as well. if you are relying on something like judicial review to constrain your antitrust enforcement to ensure that it does benefit consumers, that's not happening in europe. >> can help you understand why this would have evolved that weight in europe where it didn't hear? >> i suspect that eleanor will have some great feedback on this, but i think it's not irrelevant that we have a common-law background. that doesn't entirely lead to this distinction of course. the other thing i think is the nature of the underlying statute we talked about a little bit, you know, the sherman act is what is a, 16 words long and it has intentionally from the start it was intended to be imbued with meaning through the courts. you see that in the legislative
history, not that i think that particularly matters but i do think that is how it happened in our country, the statute is vague. consumer welfare standard is not mentioned in the statute at all. over 100 years of many, many traditional cynicism -- decisions, the textile from the judiciary. i don't know the exact numbers but how many cases have been in europe reviewing and interpreting the statute? they are younger but it's a lot fewer because of the nature of the institutional process. so i think it is very much intentional in the united states, at a think it's also very much intentional in europe because as i said the commission is a political body. it's not inappropriate for europe to operate under that system and it don't mean to imply that it is. i think jonathan is right. i do want to impugn their system for themselves. the problem is trying to import that system or something like it
as senator klobuchar says, no one is trying to bring in the european system, but a system that in particular doesn't operate to constrain enforcement and particularly criticized enforcement as much as we currently do here. i think is inappropriate for our regime. >> thank you. that's helpful. senator klobuchar. ..
because of this obscure seemingly invisible clause. the clause prevents merchants from charging lower prices on other on-line sites and i'm concerned that these price parity provisions may be hurting consumers by artificially raising the prices of goods. these millions of americans will be buying this holiday season. amazon's price parity provisions prevent sellers operating on its site from selling their goods at lower rates on other on-line marketplaces. that means as the experts know well that third party merchandise sell on-line marketplaces were lower transaction costs cannot pass on these savings to consumers. and relatedly, e-commerce sites that want to compete with
amazon to attract sellers to their sites have less incentive to offer third party sellers lower fees, given that third party sellers couldn't pass these savings on to consumers. if that's true, price parity provisions act as a barrier to entry from competitors. they are an anti-trust violation potentially a violation of our laws. and you also know that the second circuit has ruled on these kinds of most favored nation law provisions as recently as 2015, saying that they can be a violation of anti-trust law, european enforcers began an investigation in 2013 and lo and behold as soon as the investigation began, what did amazon do?
it ceased these practices, but it continues them in the united stat states. so i want to just ask our panel, and i don't have a lot of time to do it, whether you have reservations about this practice and do you think that american consumers deserve less protection than european consumers? >> let me begin with mr mr. cantor. >> thank you, senator, it's an excellent question, i won't comment on the specific example 'cause i'm not deeply familiar with the facts, but i will say that to observe your remarks about law that's dead letter or a law that's unenforced is dead letter and i think anti-trust enforcement, particularly government enforcement, serves an important deterrent value and the more it's enforced and
the more companies are understanding of where the boundari boundaries lie, that deterrent has meaning. so, certainly the types of issues you're talking about generally speaking seem worthy of investigation and i do think it's critically important that enforcement and the anti-trust laws not become dead letter. >> thank you. professor? >> [inaudible] thank you. i agree. i wanted to reference your first statement, law enforced would be a dead letter and i want to link what you just said because i agree with you. if amazon is using most favored nations clauses as a barrier, as a moat, to make it very difficult for those who have something to offer to consumers, better price, better product and they can't do it
because of this barrier, that should be illegal and the law should be enforced against it and i want to link what you said about barriers to eu competition law and i know this was not your question, but if there is some time, i want to refer to mr. manne's statements about eu competition law because i don't agree with them all. i want to say something about what is consumer harm and does the eu require proof of harm. but here, on the barriers, this is exactly where eu law is very concerned with barriers to entry, and is very concerned with access of outsiders and wants to protect competition on the merits and if people are frustrated from offering what they have to offer to serve consumers in a better way, that is a competitive harm. thank you. >> my time is about to expire, but anyone who has thoughts about this issue in writing, i
would very much welcome them. and i don't want to take additional time because senator klobuchar has been so generous in yielding to me. thank you. >> senator klobuchar. >> thank you senator blumenthal. i have a few questions here. i thought i'd start with you, professor, and that is that less than a year ago at an april 2018 panel, i think, you suggested there is a perception that enforcement in the united states has become, quote, timid and, quote, passive and that europeans felt they needed to become the global leader in anti-trust enforcement policy because the u.s. has defaulted. those are your words. do you still that the u.s. has defaulted? what should we do about it? >> i think that the google experience in the u.s. did create a strong impression in europe that the u.s. could not perform. there was a great run-up to
that case, it was highly publicized and ftc had a lot to suggest it was a signature piece and analysts 0 work on the case and then closed the file. i think to european observers, i've spoken with a great deal. it was sensitive subject. and you had the dream team of advisors and all you do is close the file and that's seen as a dead sign. i think that the u.s. is more robust than perceived. i turn back to the u.s., the ftc is running now. the qualcomm case is enormous important case for the u.s. doctrine. the shire case running in the 3rd circuit is very important case for u.s. doctrine. the ftc is running cases now and boundaries and the barrier that you talked about before.
but i see the willingness-- >> the barrier would be the supreme court. >> the jurisprudence. >> i like the minnesota euphemism. >> and these cases would not existments okay, appreciate that. thank you. professor fox, you have written that the u.s. has gone the direction of anti-trust minimalism in applying section 2. you've also said that there's problems with the law when it comes to technology. does this suggest that our anti-trust agencies could do more or that we need to-- towards court or where it's the laws, you know, what would you start, if you could wave a magic wand to improve things? >> well, to begin with, i think that our federal trade commission does have the power too look at these problems and to do something to solve them if they believe there is a problem. so i think under section five of the federal trade commission act it is ample enough.
i think under section two it's not ample enough. i think it's so noninterventionist, because it has gone in such a direction, it's actually lost resonance with the rest of the world and goes much more in the direction of european union. i don't at the moment suggest revising to the sherman act. this is a very, delicate thing to do. i think that your bills, which are about mergers are helpful and useful. and so. with the combination of your bills to make merger enforcement more aggressive, and more satisfactory and federal trade commission initiatives to protect against very negative conduct of big data companies, that we would be in a much better shape. >> okay.
mr. kanter. large technology companies, as you know, have bought a lot of innovation, tech startups, but as a director of the ftc's bureau of competition it's noted these kinds of acquisitions can be anti-competitive if they foreclose the growth of a potential rival that could one day unseat the large firm or maybe unseat the large firm in a certain area of their business, not an all areas as you look at what the companies are doing. preparing anti-competitive mergers is a priority. that's why we did the bills that professor fox just mentioned. do enforcers in the u.s. and europe give appropriate scrutiny to acquisitions of potential competitors by large tech companies? and what more should they be doing? >> sure. it's a great question and i think-- i think there's-- there are good intentions, to a large degree in this space, but a failure necessary to act on those intentions and that flows
from a lack of rigor that's been developed to address these questions and have tools and rules of the road in terms of how you spot a nascent competitive threat, how you treat disruptive paradigm shifts, and so i think there is a gap in the united states in how to treat these issues, and the absence of guidance, both from the agencies and from the anti-trust community, it's sort of left it largely untouched. and you know, i commend the ftc from addressing these issues and i think as we look forward to a new economy with new roles of t rules of the road how the businesses should behave. we should look how it should look for anti-trust enforcement so it seems relevant. >> thanks, does anyone else want to chime in on that, mr. manne, professor.
>> i'd like to, if i may. >> okay. >> i have a couple of things to say i know your time is limited so i'll address just one. i think it's a risk of counter enforcement actions as to a you can cessful regime has more enforcement actions and a less successful has fewer enforcement actionsment and our regime has the deterrent effect ftc and, and the doj, and i assume the agencies are watching these things, and not just the agencies, but the states as well. the fact that they may not-- >> you assume it, but remember, these are like trillion dollar companies, we haven't really changed how we're funding our own anti-trust enforcement. as they get bigger and bigger and more complex, just like congress hasn't been a counter balance. you might not have a counter balance with this either not to the extent that you would want. >> so, i mean, it's possible. i haven't heard that the agencies say that they are,
that they haven't brought cases simply because they don't have the resources to-- >> well, they like to-- they liked the idea that we looked at some of the mega mergers charging a fee a drop in the bucket for their lawyers and business people to help fund the review of some of these deals. >> and i don't think that that's inherently problematic. again, by the same token you can't say that more enforcement is inherently better, you can't say that-- . >> i talked with with mr mr. kanter. buying your direct competitors, the small guys and basically if the plan is to make sure they're not a threat in a certain segment of your business. >> so, the problem is, as i said in my testimony, the same conduct that you can describe as anti-competitive can always be pro competitive. mr. blumenthal talked about the competing on platforms. and the effect of what he
described would keep prices lower on amazon's platform to the extent that more people are shopping on amazon's platform is receiving the benefits of that policy. that's not necessarily to say that they outweigh the cost or what you're pointing to can't potentially be a problem. before we can describe a potentially anti-competitive scenario around them. it doesn't mean that it is, in fact, anti-competitive. so these companies buy other companies all the time and they improve their own products and again, just like i was saying with regard to amazon, when facebook, for example, improves its product, it benefits, what is it? ed 5 billion users of facebook. when a small competitor improves its product, it benefits let's say 100 million users. that doesn't mean that that competitor couldn't eventually be an important restraint, but you can't discount the fact that the benefits of the incumbent, if it has a lot of uptake, if it's providing benefits to consumers, that improving itself is a benefit
today, right here and now that's measurable and apparent and what you're describing is a theoretical potential harm in the future. >> okay, mr. kovacic, last answer and then back to senator lee. >> thank you for letting me come in on this question. i think if the agencies today had the evidence that backs the hypothesis, i think they'd bring that case. i think they'd bring the case when they saw that intent. and maybe they're more attuned to looking for that jscenario. i do tend to doubt that section five of the ftc act has the elasticity that elinore referred to before and this may be an area where the congress has to come back in and give the ftc the subject tool, not the spillover i referred to about troubled damages to allow the ftc to play this role.
how many times this they won a section two type case before the supreme court, that would be necessary. >> guessed that was the answer. >> it is. the courts have applied a terribly limiting interpretation to it. i think that's worth revisiting. to say it's the government of the united states, it's not a private troubldamage lit gent. the united kingdom has a mechanism that permits the examination and challenge of behavior or circumstances that has adverse effect on competition and impose remedies without having to show that the behavior or structure in question has violated competition law standards. i think the u.s. could allow the ftc to fulfill the potential that professor fox
could get to. >> if i may, and this is maybe a refutetation to something that professor pointed out and professor fox and there was a time not so long ago, there was no limitation from the supreme court whatsoever and what the ftc and the department of justice wanted to do under section five or section two. an if you look back for example, because the hearing is focused on section two look at the language in the alcoa case from 1945 where judge learned basically says if you become a monopoli monopolist, you're liable for monopolization unless it's
thrust upon you. and back in the day at least until say the early 1970's, when the agencies were perfectly free to take that legal authority and pursue the kind of case that is being urged here against these technology companies or whoever, now in the american economy, the result was in re exxon, in re kellogg, u.s. versus ibm. in an effort to challenge power and access which elinore suggested. i'm glad to say none of those succeeded. i think the american economy and the anti-trust field is much better because none of them succeeded and in fact, chairman kovacic can give you the site because he's the one who evaluated these efforts in a law review article not so long ago and described them, i think his phrase was, monuments
of prosecutorial ineptitude. >> all right, having that former job, that would be a scary-- >> let's not forget -- let's not forget those very clear lessons of fairly recent history about, you know, wanting more authority from the courts and just-- >> understand. i think that our economy has continued to grow over time so what i'm concerned is, you know, back then did we have a situation where you didn't have the internet, but where people were, you know, talking to their mom or their friends about what movie they wanted and that someone actually took that conversation, which is now posted on facebook and gave it to a bunch of companies so they could target them for advertising their movies. i don't know, i don't think they were listening to the conversations. we have now unleashed what are essentially dominant media firms in certain areas, highly successful, employing a lot of people, but is it working for the average american? >> there are many reasons--
i completely agree, every new industry, every new technology presents its own challenges and issues and it's great that we have a statute that it has the gener generality, the magna carta generality of the sherman act so we can look at new issues and decide what the appropriate response should be. but it should always be with the basic objective of using the best analysis we can bring to bear to protect the process of dynamic competition with the ultimate objective of making our economy as-- and our consumers as well off as possible. >> all right, thank you. >> professor fox, mr. manne suggested you might have some insight on the question i asked him about why it is that the european system evolved different than the u.s. system. do you care to opine on that? >> yes, thank you. the european union system is
based on community within the internal market. this fits really seamlessly with the idea that firms ought to have a right to contest markets. it fits with the free movement of firms across borders. and so the european union ended up with rights of access. i mean, not absolute rights of access, but rights of access so that firms that are challenging markets are not frustrated from entering because of practices that are considered abusive by adominant firm. i know abusive needs definition so you need to know what those practices are, but they are conduct such as a company which hosts a platform, preferring its own, demoting its rivals or having anti-competitive clauses such as preventing interoperability. this means that the eu starts from a point of access on the merits, whereas u.s. starts
from a point of saying, in section two, no intervention unless the plaintiff can prove that output is limited. and many of these cases, probably there's no limitation of output in these big data cases, probably not cases about limitation of output, but maybe cases of frustrating rights of xugs competition on the merits. >> thank you, that's helpful. do you want to respond to that, mr. manne? >> i agree, i think though, i just want to stress that the-- putting integration and even entry, giving it primacy over consumer welfare effects is not necessarily good for consumers. it may be appropriate for the purpose of european integration, but you can't say that just because we're improving, perhaps, the rate of entry or contestability, that we're improving things for consumers that the doj, for example, brought a case against apple as it tried to contest and enter into a market and ar
goo you that it was acting anti-g anti-get-- anti-competitively. and apple saying hey, we're improving competition here, because rightly or wrongly the 2nd circuit decided that was not the likely consequence of what they were doing with respect to consumers. don't disagree, but i want to disagree that is different than what we have in the u.s. >> another question for mr. lipski. let's go to mr. kanter wants to answer. >> that's a provocative question, thank you for answering it. and professor fox, i think it feeds into questions that you've asked and senator klobuchar asked. at some point the anti-trust laws converted to, you know, the goal of anti-trust law being to manage in the united states, at least, efficiency and output, but now we have markets where it's very difficult to quantify output and it's very difficult to measure efficiency.
and so i think we are starting to see some of the challenges and limits of that narrow approach. and some of the calls for advancement and movement into new ideas is in large part designed to make sure that we're not relying on old economics and old economic principles that are baked into the law that don't reflect the realities of transformed marketplaces and measuring output in some of the things we're discussing one and one doesn't equal two and it's i am possibly difficult and sometimes often irrelevant to the goal of the anti-trust laws, anti-trust laws exist because we value the competitive process. we're not trying to engineer markets. we're not trying to central planning to ensure that everything is efficient. we believe the free market and competition will ultimately yield benefits for our society and if we focus too much on
this ideal of efficiency or output, we lose-- we lose the feel of the anti-trust laws and they become almost impossible to apply and i think that's one of the challenges that we're facing right now. >> thank you. professor lipski, you wanted to add something. feel free to add that, but i also want to ask you a question as you add that. the united states under our system of laws firms that achieve market power through legitimate means are not expected to pull competitive punches in order to prop up their rivals. it's not something we do. it's not something our laws require, but by contrast in the european union, such firms have what's known, i believe, as special responsibility. >> right. >> to act as much as possible as if they had no market power.
that seems to me to be frighteningly broad, vague and uncertain. so, how are firms supposed to know how to operate in the eu under this special responsibility mandate? >> well i think it's extremely difficult and i think that's why i would fear the chilling effect of adopting that kind of a principle. i think it's a cogent criticism the way eu competition law is enforced. i would draw your attention to the article cited in footnote nine of my written submission, an article written by a very distinguished and thoughtful and dedicated lawyer who used to be the chief anti-trust lawyer of the european competition. i suppose you could say he was kind of the anti-trust solicitor general for europe
and he has a somewhat more bare knuckles defense of the european approach than othersen the panel suggested. if you're saying that we value rivalry despite any cost. you're adopting rivalry as an objective in conflict with the idea of economic growth and i think in response to mrmr. mr. kanter. there has been a distinction between the anti-trust, the guiding interpretation of anti-trust law and the r
recognition that the policy instrument of the anti-trust laws is competition, but it's different to say, well, we're trying to maximize output in every case. no, we're not. we're trying to observe the competitive process to the end that economic growth and productivity will be maximized. it's only in the difficult cases. this is not an issue in a price fixing case because we're totally convinced based on economics, historical record, observation of the way industries function, a horizontal minimum price fixing is bad. it ought to be condemned. we ought to prosecute it criminally. we don't worry anymore whether that rule serves economic growth. we're confident that it does. it's only in the hard cases and most of the section two cases involving things like low pricing or product bundling or
activity that is ambiguous in its ultimate competitive effect. that's where we want to have the courts discipline the enforcers to think clearly about whether the rule about competition that's being applied in this specific case will or will not enhance economic output so i think that disturni distinction helps to sort it out. >> the key distinction, rivalry does not show competition. rivalry can involve competition, but not the same in and of itself. in order the achievement on preservation of rivalry is itself not sufficient to maintain competition. >> correct. and when we-- particularly when we look at innovative activity where a firm will make some great invention and get a patent and and implement that patent and license it and produce with a
technology in a way that maximizes its profits, precisely because that has arisen by the act behavior that we want to encourage innovation and intention, and commercialization, precisely because all the elements of that behavior are favorable to the competitive process and to the maximizization of our economic wealth, we say no, you should not force the sharing of that technology with other firms who have contributed nothing to it. you know, the mere enhancement of rivalry is actually in contradiction to the basic objectives of the anti-trust laws. >> as the international commerce, including e-commerce between the united states and europe continues to increase, as the pace of commerce
continues to accelerate with the pace of technology, do you think we will see differences? i mean, these differences, perhaps in the past, wouldn't result-- wouldn't necessarily manifest themselves in big economic differences between europe and the united states, but would you expect those to become more obvious in the years to come? >> well, i think there are some who compare economic performance between europe and the united states and conclude that actually the-- whatever we're doing here is working better than whatever they're doing there. i'm not advocating one way or the other, but i think that professor manne has a lot to say about that, but it certainly could be, as you say. >> thank you. senator klobuchar. >> thank you, mr. manne, did you have anything more you wanted to say on the innovation question i asked? >> and okay.
well, it was about if-- whether or not this purchase by the tech companies of the smaller firms is limiting innovation. >> well, actually i would point to what he just said. excuse me. t the-- you can't count the number of competitors and from that determine the competitiveness of a market. and part of that is because of things like scale effects and upfront costs and the wide range of market structures that are optimal or as best we can achieve for any given set of circumstances, which themselves vary massively between every market. in some markets in particular, these tech markets. because of network effects, because of scale economy, and
other things, that a large size seems to be pretty efficient. now, that doesn't mean by the same token that, you know, quashing every competitor or something like that is-- contributes to the efficiency of the markets. it really just means that we can't look at that and say it's presumptively bad. i think that's just, particularly true when it comes to the companies purchasing other companies which is the specific questions you ask as opposed to engaging in some sort of conduct that prevents them from being able to exist, right, that causes them to disappear with the market. i think those are also different things that go to the dynamic consequences because purchase by a bigger companies is one of the ways we invent advise -- incentivize in the first place. >> someone on twitter said i bet no democratic senator will ask you a single question because you answered in such length and he's like the
congressional witness equivalent of the guy who can swim seven laps on one breath. i thought that was sort of amusing, but i wanted to prove to them i was not afraid. i know i wasn't afraid of asking you questions at all. >> coincidentally my written testimony was 63 pages. >> that will be good nighttime reading for me. so i wanted to get at, on-line travel agencies, something i've been sort of obsessed about for a while. most favored nation clauses, as you know, or mfn's are contract provisions and i'll ask you, professor fox, this, and you, professor kovacic. most favored nations are provisions one side imposes limits on the other side's ability to deal with parties. and imposing the provisions will always receive the best prices or terms of trade.
while some mfn's may be pro competitive. i've heard complaints of the common use of mfn's, such as imposed by on-line travel agencies on hotels. european national competition authorities have brought a number of enforcement actions against dominant on-line travel agencies and forced them to narrow the scope of the mfn's, but u.s. haven't been active in the area. according to professor fiona scott morton, differences in legal rules do not explain the enactment against on-line travel agencies. mfn's, how could you explain the lack of enforcement, do you have any thoughts on that? >> professor fox? >> yes, it's true, of course, that eu nations have been active, especially france and germany. this is an interesting area
because a platform is trying to get the lowest price. in fact, it's trying to get a low price, not a high price, but given the mfn, it works out that this raises prices and there are wide and narrow mfn's and in general, that the mfn's seem to raise prices in spite of trying to get a low price and therefore, i think there probably ought to be enforcement. and european union has stepped back and the space in force and i think that they have a law that prohibits the mfn's and most european countries prohibit what is called the wide mfn's which is, you'll get-- which is, it applies to all platforms and competing platforms and applies only to the hotel versus the platform saying, i won't give a lower price. i think it is something to
explore. i think in the u.s. another reason that explains why there's so little enforcement is because it's written in terms of a vertical agreement and the u.s. has been much in law under section one of the sherman act in my view, and also section seven with at&t time warner has been much too conservative in effects of vertical integration. >> got it. >> thank you, senator. as elaanor said, there's a treatment of the practice in europe. one thing i mentioned in my written paper, agencies to consult more closely with their european counterparts to look at the debate more closely and why you've seen intervention in some instances as opposed to others, as a way of informing judgments about what to do here. i do think there is a lot of
room for the u.s. institutions to revisit the treatment of vertical contractual restraints. since what you mentioned before, what has been the level of u.s. federal enforcement involving resale price maintenance, there's a speech by the department of justice in 2009 and the ftc approved an order modification at roughly the same time. that's been it. no further guidance. no revisiting of this issue. it's as low legions became the occasion to walk away completely. whatever the act form of intervention might be, it's a good place to reengage and the discussion with our european counterparts, the member place would be a good place for that discussion. >> and last question, last of the hearing for me. so underlying platforms, kind of led with this with the news today exist in winner take all markets in which they may not
have started out that way, it feels like that. we're unlikely to see many competitors no matter what we do with anti-trust in the short-term. this led some to suggest that we supplement anti-trust law enforcement with sector regulation of the markets. in the on-line data protection area, for instance, senator schotts is leading a bill and i'm a co-sponsor of the data care act, on-line taking steps to safeguard information, and stop misuse of data and the privacy legislation that senator kennedy and i have in the competition area, european has proposed a digital platform regulation that would require on-line platforms to implement measures to promote fairness and transparency. do you think that congress should consider legislation, i guess i'll ask you this, mr. kanter. professor lipski, should we address some of the competition
issues raised by dominant on-line platforms or do you think that anti-trust enforcement is going to do the job. i'll start with you, professor lipsky. privacy concerns should be taken serious. i think the main question i have in response is what does privacy have to do with competition and the particular values that are addressed specifically under the anti-trust laws? i can imagine scenarios in which the conditions of privacy of customer data or consumer data, which is-- which is probably a very significant term of trade, just like a price or how many frequent flyer points you get with each dollar purchase. the degree of privacy. that's something over which competitive providers ought to compete and that to some great extent should be subject to the same rules that you apply to an agreement on credit terms or anything else. >> right, but what if you don't
have competitors for certain-- >> well, i think-- well, again, you would be using monopolization standards and that would be under a manufactured, unfairness concept. you're talking about instead some of the privacy rules? >> yes, i've completely supported the notion of protecting the consumer-- the privacy consumer data to an appropriate degree, but it is something that i think only has a certain profile in the anti-trust lane. >> got it. >> it has-- i was kind of linking them in that this isn't kind of working and 'cause you want competition to do this, right? you want to have these-- >> deal yes. >> if you're competing and if you're the bad guy that got the data out and gave it away, then, well, story, everyone is not going to use you anymore, it hasn't worked that way and so that's why my argument is, if we can't immediately-- if we're not going to use anti-trust and the courts won't
to try to look at this and you may argue, that there's not a real way to do it, then we might have to-- it's a way to explain why we're also looking at privacy laws. there's no way to compete them into doing it. they're not doing it themselves. >> it's interesting that say that, because the icle that director manne-- >> he's afraid to talk. >> he's already talked, i'm going to summarize for him. >> i've been cut off. >> he held a conference not so long ago and there was a representative of the european union, a competition enforcer who basically, you know, somewhat suggested that they use the competition power to regulate privacy. and when questioned about it, she said, well, the competition laws are extremely powerful. it's essentially-- and i was very surprised to hear that i used the expression to somebody with a hammer everything looks like a nail.
none of the europeans heard that expression. >> we're admitting that this isn't working this way and so we'll go to mr. kanter and chairman lee. >> and it's ironic the filibuster is coming from the panel. >> thank you for that acknowledgment. >> you're raising an important question, in the absence of competition regulation becomes only the necessary tool. >> that's a much nicer way of saying it, more direct. and justice brandeis took head- head-on, regulated competition versus regulated monopoly. in his view anti-trust was that you have regulated competition meaning you preserve the opportunity for the free market to create pressure among many ways of competition and yields lots of benefits, but under enforcement of anti-trust or the disappearance of anti-trust
could lead to a situation where competition can provide the necessary discipline in the market and the only solution left on the table is regulation, that's not preferable. at least not from my view. i think a competitive free market is far more desirable. >> we just don't have that, but thank you. well. >> may i offer a suggestion? >> yes. >> step one, congress adopts an omnibus unified privacy law frame work that replaces the pieces with an omnibus stet the standards. step two, it makes the federal trade commission the national data protection authority by getting rid of the ridiculous anachronist anachronistic carveouts that you and your colleagues control and can be in a blink of an eye and the ftc having now the combined consumer, privacy and competition mandate you tell the ftc pick the right tool and
collection of tools to fix this problem. >> all right, thank you, i really appreciate this discussion, thank you. and i want to thank our staff and senator lee's staff for putting together the panel. they did a nice job. >> i hear someone refer to legion, i'm reminded of the fact the law clerk who wrote the memo in that case, very handsome, went into politics very handsome. >> wear a red, white and blue tie. >> i have no blame to fame so that's the only claim to fame i have. >> i had no idea. and now i can add that to my opening remarks. >> i expect to get a lot more respect as a result of that. which you always show. okay, a couple more questions, professor kovacic. you suggested in your testimony quite persuasively, i think, that there is kind of a one-way
ratchet effect in that in the global economy, the jurisdiction or at least the active jurisdiction that has, yeah, that has the most intervention-minded policy, has the power to set sort of a defacto global standard and that so i guess my question is, does that suggest that the europeans can effectively dictate how u.s. firms will act globally, including within the united states, according to eu competition law enforcement? >> increasingly means exactly that. because it becomes harder for firms, especially in the tech area and these information services sectors to establish different standards, different approaches for different regions of the world. what's around the corner, i think, senator is that the emerging third force will become co-equal with the two jurisdictions that we
mentioned, that will be china and china goes to school carefully and what the other two do, it's deeply influenced by the european model and a major reason why the united states and europe should think about what the frame work should be. because in a relatively short period of time it will not be their call. >> mr. manne, in your testimony you talked about the chilling effect na could be in this dynamic. if u.s. firms are essentially forced or effectively coerced into complying or modifying their business practices in order to comply with what eu regulators want them to do what might this mean for u.s. consumers of the products and the services of those firms? >> first of all, can i just say i didn't know about the legion thing and you're kind of my hero now. >> fantastic, i'm loving this. >> after of the anti-trust bar
kind of hates you, but half, more than half, you're our hero, so -- with respect-- >> like an anti-trust "star trek" convention. >> i think that's called the aba spending meeting. >> not that cool. almost that cool. >> that's a low bar. so now of course, i've lost my train of thought. >> i ams' so sorry. >> no, no, that's my fault. i think that the problem is sort of as bill suggested, what happens with these spillover effects if you care about the u.s., i want to say preliminarily, there of course an inherent cost to compliance with multiple conflicting regimes. and this is a, you know, totally sort of separate question and it's a complicated one, but i think it is certainly worth pointing out that that loan presents costs
that has to be born by companies, but that's the nature of doing business this a global environment. the bigger problem i think is what bill suggests, when, as an effective matter, there's essentially no geographic boundary to the operation of these rules and especially when it's china doing that. and i think one example, the android case in europe, the google android case, right? some of us predicted that what a consequence of the european union basically saying this business model doesn't work for us, you need to find a different business model is indeed, i think it's the case, correct me if i'm wrong, that google decided to start charging developers for android various things they haven't done before, that will raise the prices of the devices that people are buying. whether that's a benefit on net, i don't know for sure. google doesn't think it's a benefit. most users wouldn't necessarily find it a benefit and as long as they can, they'll obviously
resist sort of, you know, selling at a higher price in the united states, but it's a global company. the effect of the inability to operate their business model in that fashion can't help i think, but raise prices everywhere, including in the united states. now, again, you know, we can't say with absolute certainty, which by the way is the whole point of everything i've been saying, that it's a-- not an improvement, you know, sort of overall. but we certainly have to recognize that the european union may be acting for very different reasons like we've been discussing and they will be effectively imposing the effects of that on u.s. citizens. i don't think we can deny that. >> thank you. >> well, i just wanted to acknowledge senator lee's leadership this week and actually for five years on criminal justice reform. it's not our topic today, but he, through two administrations, one democratic, one republican, he was unwavering and worked across the aisle and it was
really fun seeing him at the front of the chamber last night taking a photo. i won't comment on that, as the ranking on the rules committee of the final vote and i started my morning out, actually at a q & a with a conservative and liber liber liberal commentator and they shade that senator lee said we'll get over 80 votes on this and they never believed him. and i want to thank him for his work. >> even a stopped clock is right twice a day and i had my moment then as journalists noted. and appreciate your remarks senator klobuchar, an effort long in the making. i don't know if you can proof that i was actually taking a photo. we're not supposed to use our phones on the senate floor. >> and maybe i mid a mistake-- >> and we're stuck in the 18th century and rules on the senate
floor and such is life and many of our colleges started their terms during the william howard taft time, it's appropriate. sorry for that. and no hearing would start without an anti-trust policy and this holiday feels complete for me because of this. thank you for being here and for your deep insights. we'll be adjourned arn we are keeping the record open until january 4th, 2019. >> thank you. [inaudible conversations] [inaudible conversations]
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